Do CEO-directors school ties enhance the firm’s competitive position?

La proximité du dirigeant et des administrateurs renforce-t-elle la position concurrentielle de la firme ?

Cédric van Appelghem (cedric.vanappelghem@univ-evry.fr), Pascal Nguyen and Younes Ben Zaied (ybzaied@gmail.com)
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Cédric van Appelghem: UEVE - Université d'Évry-Val-d'Essonne, LITEM - Laboratoire en Innovation, Technologies, Economie et Management (EA 7363) - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay - IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris]
Younes Ben Zaied: EDC - EDC Paris Business School

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Abstract: France stands out for the restricted number of highly prestigious schools in which most of its business elites have been trained. This inevitably leads to the existence of close ties between the CEO and other board members. These school ties impede the monitoring function of the board of directors and do not incentivize the CEO to develop the firm's specific assets in view of enhancing its competitive advantages. The result is an increase in systematic risk, especially when the firm has few growth opportunities and uses low leverage. However, the presence of a large shareholder and greater coverage by financial analysts can serve as alternative control mechanisms capable of mitigating the effect of CEO-directors school ties. Taken together, our results underline the drawbacks of social ties and suggest that governance codes should take them into account.

Keywords: Social ties; Governance; Competitive advantages; Systematic risk; Relations sociales; Gouvernance; Avantages compétitifs; Risque systématique (search for similar items in EconPapers)
Date: 2021-03
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Published in Revue d'économie politique, 2021, 131 (2), pp.263-296. ⟨10.3917/redp.312.0095⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03274787

DOI: 10.3917/redp.312.0095

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